q.beyond AG

Welcome, ladies and gentlemen, to the H1 Earnings Call 2026 of QBeyond AG. I would like to welcome the company's CEO Thies Rixen and CFO Nora Wolters, who will guide us through the figures in a moment, followed by a Q&A session with audio line and chat. And with that, I already hand over to you, Mr. Rixen.

Yeah, thank you, Mara. Welcome everybody to the Q2 call. As usual, Nora and myself will present it. I will start with a short introduction and setting the scene and Nora will give you more insights in the Q2 numbers. We called it the accelerated AI transformation. in Q2. So what's the current status? We are better with AI in the AI progress as planned, but still we are, let's say, suffering a weak demand from our clients, from the German or European Mittelstand. Adjusted EBITDA is as previous level if you count the 1,000,000 or 900,000 transformation costs we invested in transferring our service desk to Romania and puts AI technology in it. So we have 2.5 million EBITDA for this free revenue use and a net income of break-even level. For us, I would say it's disappointing. So we planned different numbers and a different performance. And one part is for sure, it's the economy. One part, the other part, it's ourselves. I will come to that later. Good is that we have still a full order book. So we did more order entry in Q2 as last year. roughly 2 million or roughly 10%, but still we are, let's say, We are impacted by last year. We see that we gain new orders, but still the signing is underway. I would say it's getting more and more complicated to get the signature under the contract. But we know what is coming and we know that we have a funnel of 200 million which we will harvest in Q3 and Q4 and we know you know that from our business model that we have stronger stronger numbers especially in Q4 and this will deliver this year also um yeah as we said in the press statement um the um AI let's say impact is on the The positive side is better than we planned. If you look at operations of the managed service business, you see that in the middle of the chart, We automate a lot of workflows, a lot of work, 6,000 hours per month. It's still growing. And this is, right now, it equals to 40 full-time equivalents. And it will be more and more every month. Therefore, we decided to reduce the workforce this year.

We will come to that later on.

This is good. The other thing I just said is that we already invested 900,000 in the enlargement of our international tech hub with Romania and also to put our service desk, which we have for our clients in Germany. We transformed to Romania and invested in AI technology to be more efficient there. You see that we will have end of the year 50 employees. This, let's say, measure would save us 1 million. We have said that we will save next year with all the transformation we do this year, we will save 7 million in total of personal cost. We have more efficiency and Romania will be the, let's say, healthcare or SAP healthcare competency center. You have seen that we bought the 51% of KTG SAP healthcare specialists and then the workbench we will establish for the new clients in Romania. Having said that, this is in a nutshell 10% of managed service already gained. We are turning the company more and more an AI-first company. So every, let's say, process should be AI-driven. We will still be a service provider where the human being is important. But on the other hand, we have to be more efficient to be more profitable and this AI will be one of our most important levers for the future. The 900,000 we already invested plus the four to five million which we will invest this year will lead to the five to six million investment and this year 1 million still in the books and this will save us for next year 7 million at least and personal costs and this will so we will do it once this year and have the 7 million every year for the future this is our business case we just announced today um yeah putting all that into account Nora and myself, we decided to adjust the guidance a little bit. So we are now expecting a revenue around 180 million and in EBITDA, let's say, including the 6 million of investment from 3 to 7. This is a one-time effect and next year we are on track as we will be on track as we have been in the last few years. Again, it's for us, it's a movement we have to take to be better in 27 and 28 onwards. With that, I hand over to you, Nora.

Thank you Thies and a warm welcome from my side as well. Before I take you through the details of the quarter, let me start with what matters most. The second quarter confirms our consult to operate model. We are growing in consulting. We are earning significantly better margin than a year ago and our recurring revenue gave us the ability to drive this transformation entirely from our own resources. Let me show you what that looks like in the numbers. Group revenues came in at 43 million euros in the second quarter after 44.4 million a year ago. This decline of around 3% stems entirely from the critically sensitive managed service businesses. I will come back to that in a moment. What really matters is the structure underneath. Our consulting business grew by 5% to 16 million euros. This is precisely the mix shift we are aiming for. The growing part of our business is also the higher margin part. Underneath of that sits a solid foundation. 71% of our revenues are recurring. 68% are generated in our five focus sectors. And our sales organization is delivering after its realignment. New orders rose by 12% to 20.6 million euros. And our sales funnel now exceeds 2 million euros. and this sale success is tangible. In the past three months alone, we won, for example, new customers like Dr. Beckmann's and Barbarossa Bäckerei, among others. Two strong names from the German Mittelstand. These wins show that the realignment of our sales organization is working. Not a promise, but in the order intake. In short, In a market where German SMEs are barely investing, we are growing exactly where we want to grow. Just how well this mix shift is working is shown in the margin. Gross profit in consulting rose from 2.C to 4.2 million euros. It almost doubled. The gross margin jumped from 15 to 26%. With revenues up 5%, that means the leverage comes from working better, not just from working more. Four drivers sit behind this. First, significantly improved team utilization. Second, a rising demand for AI consulting and third, the growing demand for S4 transitions. A wave with a fixed deadline. A mainstream maintenance for SAP ECC ends in 2027. And at last, high margin one-off license revenues. Let me make the AI demand tangible for a moment. When it comes to artificial intelligence, our customers are wrestling with three problems. First, their data must not leave their premises. Second, they need to comply with the AI Act. And at last, they struggle to move AI from pilot to stable productions. We already have market-ready answers to all these three. With our private enterprise AI, we have been offering the sovereign data platform since 2025, private, local, Made in Germany, 100% data sovereignty, including consulting service, training, and GPU as a service. With AI Act as a Service, we launched a tool. This year, this is unique in the market. Companies obtain a risk classification to their AI deployment, bookable online, usable without any integration, and managed AI workflows. SLA-backed workflow automation, operated 24-7 in our German data center, are going to market now. The next steps in managed services with AI will follow in the next quarters. Our path towards to becoming the A operating partner of the German Mittelstand. Let me be transparent there. The license effect is a one-off. But even without it, the margin is well above last year's level. In the structural drivers, AI consulting and S4, we carry us well through 2026. And from this quarter, GITG at the Fursa building block, propriety IP for the succession of SAP ISH. In the German market, this affects more than 500 hospitals. Now to managed services. This is where the investment reluctance of German SMEs is most visible. Revenues came in at 27 millions after 29.2 million a year ago. The gross margin before the one-off provision stood at 19% after 22%. Three factors weigh on the segment. Subdued new business, price adjustment for existing customers in a sluggish economy, and quite deliberately, our ramping up AI investments. And this is exactly where the turning point lies. The increasing use of AI is already lifting our efficiency measurably by more than 10% in managed services. That is not an announcement. This is a measurement. From the third quarter, our new site Include Romania takes over AI-assisted 24-7 support. This alone will generate savings of more than 1 million euros a year. from 2027 by boosting output by 25%. And we are not keeping this efficiency to ourselves. We already automated 300 workflows internally with another 1,000 in development, as Thies already said, saving more than 6,000 hours every month. This is precisely this field problem workflows that we will start marketing to third parties in the third quarter. What saves us costs today becomes revenue tomorrow. We are not hiding this weakness. We are systematically rebuilding the segment. AI is changing the cost curve of this market. And we have decided to be on the right side of that curve. So what does all of this mean for the income statement? My message up front. Every deviation in this table has an explanation. And none of them is operational weakness. ABTA came in at 1.6 million euros. This includes a provision of 0.9 million euros for the first stage of our AI transformation. The restructuring of our service organization. Adjusted for this, ABTA stood at 2.5 million euros. close to last year's level. The adjusted margin unchanged at 6% and adjusted consolidated net income was zero exactly in the prior year. Two lines deserve a closer look. Sales and marketing expenses rose from 2.9 to 3.7 million euros. This is our deliberate investment in the realignment of our sales organization. and it's already paying off. You can see it in the 12% growth in new orders. In return, we reduced general and administrative expenses from 3.9 to 3.4 million euros. This counter movement shows one thing. We are in control. And the overallness of this transformation is simple. One of costs of 5 to 6 million euros stand against savings of around 7 million euros from 2027 per year. The payback period is less than one year. 2026 is the year of transformation. 2027 is the year of harvest. and we are funding this transformation entirely from our own resources. Net liquidity stood at 41 million euros as of June 30th, just one million below the year-end figure. Even so, we paid out variable remuneration of 3.9 million euros during the quarter. Compared with the same date last year, net liquidity actually increased. This corresponds to 1.65 euros per share with an equity ratio of 70%. The free cash flow of minus 1.6 million euros in the quarter is essentially a timing effect, not a structural outflow. In the third quarter, the purchase price for GITG will affect liquidity. That is planned for and fully funded from existing resources. This balance trench gives us the freedom to do three things in parallel. First, fund the transformation. Second, grow inorganically with GITG. and at least at the end of August, once the statutory waiting period has expired and subject to the decisions of the management and the supervisory board, buy back our own shares. We are acting from a position of strength. And with that, I hand back to Thies for the road ahead and our 2028 strategy. Thank you, Nora.

So what will remain unchanged is our strategy for 2028. So we set three things in March. One is the sector focus. So we like to enter two industries, health care and energy, to drive or to harvest two macro trends. With the GEGG acquisition we did the first and we will take some time to integrate it or to find a way and then we will target the next target for the sector focus. Enabling AI, I think we talked a lot about to give you more details what our plans are. and internationalization. We already started our go-to-market activities in Latvia and Spain. And with Romania, the setup is done and we are hiring people there.

So it's paid off.

Here you see some details about GGG. I think we already stated this in our press statement. Maybe my summary is the market is there. There's this SAP, the SAP solution. will be out of the market in 27, latest 2030. That's the number two. And the market is with 2,000 hospitals in the DACH region is huge. 500 of them have the SAP solutions. They all need to do something. So this is what we'd like to tackle. and this is number three with GTG with their own IP. We have a foot in the door and it's like an iceberg. So the revenue per hospital is one thing is the SAP template, the healthcare SAP template. But the majority of the business is the normal S4 transformation and cross selling. and cross-selling we will do concerning Microsoft business or security. So for us it's more, let's say sales, it's more a sales machine than the business by its own. So that's number one. Number two, as you just said, Nora, we have several services live. So this is not Kubeon internally. This is what we offer to the market. So we launched our private enterprise AI. We launched the AI as a service. We already have launched and managed AI workflows. and then we will launch in Q4 the orchestration platform for our clients. And all what we learn internally will be incorporated for our clients also. And as we said, we expect 10% of the revenue to be AI driven in the future. Internationalization, Nearshore, the international quote or Nearshore quote is important for us. I think we will be end of this year roughly at 30%. We are gaining for 40% in 28. So this is well on track. and here you see the the add-on Nora just just said the capital allocation so we promised that we will do it this year so we will do it this year we have done all the necessary steps we have to wait till the 17th of august there's this waiting period Then it ends, then we will take the decisions as management and supervisory board. Let's say it's already decided, and then we will start the buyback the week after. That's it, and we can buy two and a half billion Kubion shares back, which is our goal. In summary, it's these three elements, organic growth. Yes, we have to do more. We have to do more. Pipeline is there. Our funder is there. M&A, let's say, is working. We are very glad that the G2G acquisition is done. We will find also a suitable next target for energy when the time is coming. And the AI operating partner. is underway to build it and to really, we see that we have trust in the market and trust from our clients and we will have more of them in the near future. With that, I would say we're happy to take your questions and thank you for your time.

Yes, thank you very much. Ladies and gentlemen, now it's your turn. We're opening up the Q&A session. If you would like to ask your questions via audio line, please click on the raise hand button below. And if you are dialing in by phone, please press Starkey 9 to raise your hand and Starkey 6 to unmute yourself. Additionally, you are also welcome to place your questions into our chat box and I will read them out loud for you. We have received a risen hand by Mr. Nielsen. Mr. Nielsen, I just sent you an invite to unmute yourself.

Thank you.

Hello.

Hi, thanks. I mean, looking at your numbers, I mean, consulting in that part, there's really no signs of a weak market. I mean, the numbers are strong at least, but in managed services, it's quite the opposite. However, one would expect managed services to be more stable in a soft market and consulting perhaps to take a bigger hit. Now it's the opposite. Could you help us understand the reasons behind?

Yeah, there's two things. One, we worked for the last two years of consulting. We worked, let's say, the last two years heavily to get the structure right and also the resources we needed. So the profit gains are because it's a better mixture. We worked on the last two years. This is one part for consulting. The other one is SAP. So the transformation, I would say it's more or less independent from the market. And if we have a good position there, it will be even better with health care. So we are gaining from that. So we did, let's say, we did the adjustments for consulting. We did during the last two years. This is now paying off. This is one. And for managed service to be quite open, There are two things. One thing is that on the sales side, it's taking longer as expected and there is some reluctance to take bold decisions on the customer side. On the other side, we underestimated, at least for the budget this year, the churn and the impact of the churn for this year, the customer churn. There's always churn each year. We know that. but normally we are able to overcompensate it and therefore this has an impact on the managed service side. So it's customer reluctance plus some things which develops in different ways as we planned.

That's clear, thank you. And regarding the gross margin in consulting, it was very strong in this quarter. You mentioned someone of licensed revenue. I mean, could you give some kind of quantification of how large that impact was?

I don't know. Do you have the details?

A lower million revenue.

which equals more or less also profit.

Yes. Okay. And revenue.

Great. And lastly, from my side, I assume that GITG is included in the new guidance. So the underlying cut is slightly higher. Is that how I should read the numbers here?

Yeah, it's included. It has an impact, but we can only consolidate five months right now. So there'll be a couple of millions of revenue and not even a million in profit. So it's included. It has an impact, but the impact is small.

Great. That's all for me. Thank you very much. Thank you.

Thank you so much for your questions. We have another risen hand by Mr. Seinewald. I just sent you an invite to unmute yourself.

Yes, thank you very much. I hope you can hear me. Hello, Nora. Follow up on managed services regarding the price adjustments in the existing base. Are you largely done with them now or do you have still some renewals coming up there?

The renewals, there's always some renewals every year. So the major ones are done. So we did Röhlich, the largest customer last year, and we did Schiebo this year. So Fresnapf is the third biggest customer at the end of this year. but we are in negotiations so there will nothing really happen there. There are smaller ones but this is, I would say, under control in a good way. So this is always the case and the pressure will be there. It was always there as a price pressure. This is a normal This is a normal way of doing business. What is unnormal for us, as I said, is that we have not been able to overcompensate the effects. And therefore, we We are now quite sure that the funnel is big enough and that we have enough chances. And the deals are there. So you have always two phases. There's a yes from the customer, and then it's a yes, then it's a signature under the contract. So we have several yes already in the books. and we are working on the last details and then the next thing is that we are as we said we will adapt the related cost to the managed service business and then the profit will be different than this year.

So you expect it to turn starting next year?

Yes, as we said. So we will do the measures now, get the hit now. It was not an easy decision, but it's better to have it now and then be prepared next year and the year after.

All right. I don't know if you said it, but on consulting, you mentioned those one-off high margin revenues. Can you size those?

I just already said a lower million something.

Okay, okay. So, all right. And what would you call it?

What is important for the SAP, this is SAP licenses we sell. So the transformation will last at least for the next two to three years. So we expect and we find now the right answers to the market. We expect this will not be only this year. So we see it for at least two years that we can have this kind of mixture. as we have this year because the clients are waiting what SAP is doing and the last chance they have is 2030 now, so in four years and there will be the majority of the transformation projects and we will be one of the partners doing them for the German Mittelstand.

Okay, I mean, looking at the 26 now, that's, that's, of course, they're not the base level, what would you regard the current base level of the consulting margin cross margin?

Yeah, at least above 20%. So there we will stabilize it. So 21, 22, 23 in this area. So brutal margin.

Yeah, yeah, of course. Then on the process automation, you mentioned in the report that you and you mentioned also in the presentation that you write an automated processes to the tune of equivalent to what 40 FTE can do. And you want to improve that even further, you mentioned. How many people do you plan to let go? How much percent of the workforce?

With the current measurement, we said 70. 70 to 80. this is a mixture of let's say layoffs and then we will have some we left you always have some employee churn which we not where we will not hire new ones the retirement retirement waves going on in Germany for the baby boomers so not only this year next year year after so this is a basket of of of several measures a total it will be 70 to 80 had counts this year.

Additionally, this means 10% of the German employees.

10%?

10%.

That's probably the 4 to 5 million additional one-offs cost you plan for second half, right? Yes. All right. Okay, last one on the, you know, just your guidance for this year, looking into your mid-term guidance, those 250 million Say it's target you have, that's roughly 75-80 million you got to add inside two years. Can you give me the building blocks of this?

This is M1A. The building blocks are organic rows. Organic growth, we can put a question mark on it. So we expected as we put out the strategy that at least the German mid-market will recover sooner. So this is building block number one. Building block number two is inorganic growth, so acquisitions. And the third one is new AI business. So I'm quite sure that the plans for number two, inorganic growth will work and also for AI. I would put a little question mark on number one.

The organic growth. So a bit rough on the numbers here, like saying those 75 million in two years, starting from FY26. How much of that is, you just said organic growth, you can't be too sure about that. So let's see. And how much of this is, how much further M&A you want to add or M&A?

Ask me next year again, please.

Yeah, but you have the midterm guidance out now, right? So what's your feeling here? Ask me please next year again. All right, fair enough. All right Thies, Nora, thanks for answering my questions. I will move back to the queue.

Thank you. We have another raised hand by Mr. Price. You may unmute yourself now. I just sent you an invite.

Hello. Thanks for taking the questions. I have a few, if I may. To start with, I would like to express my congratulations, and I don't want to seem arrogant by any way. The linguistic improvements you've made, Nora, since the last poll are really day and night. It's a pleasure to hear that because facts matter, of course, but communication is what is understood. So thank you very much for doing that. So to the questions. Firstly, very simple one. Are you employing a mix of AI models? So is that basically something like Claude or can you give us any specifics on what you are using practically? And the second one regarding the share buyback, maybe I'll ask that after the first quick answer.

so we are employing several ones on the limit we are employing several models it's for the let's say office workers they use copilot from microsoft so to to to to organize the work let's say for the process automation we use our own model let's say open source models which we operate on our own so open source models and then for some Special things we are working with Entrofic, with Claude mainly. So we have three models. One is from the office workers, it's Microsoft. And for the main part, we use open source models which we train by ourselves. And we are hosting it by ourselves. And the third one is Entrofic, Claude.

So data security and data privacy are your main focus? Yeah, sure.

And this we will, while we are doing it, one thing is to be secure and compliant. The other one is token cost control. So this we like to, and the third one is we like to build a portfolio for ourselves that we can offer also to our clients. And this on a European scale, as we said, We will roll out all what we develop here in Germany. We will roll out all the AI services. We will roll out to Latvia and Spain.

And basically, you offer co-pilot as it is and customize everything else.

Yes.

So what is the advantage for a customer then to order Copilot via QBeyond and not directly?

No, okay, no, it's for ourselves. So ourselves, we will not offer Copilot for the market. So what we offer to the market, we develop ourselves. And this is based on open source. the the co-pilot it's more an introduction so we will we will offer what everyone can offer because it's it's it's a microsoft product it's more it's more enabling workshops um train the people and all the other stuff so normal consulting c business for co-pilot

Thanks. A quick follow-up on that easy topic still, which just cropped up into my mind. In the last call, you said you'd expected to enhance the usage level of your data center in Hamburg because of that trend to be a bit more independent from US companies. Did you make any progress on that front?

Yeah, we sold, let's say, 20% of it. So we sold 20%. We expect to sell more during the year. So there's some progress, not as we like it to be, but it's step by step.

But when do you expect it to be fully rented out?

Let's see. The plans, the pipeline is... With the pipeline, we have a chance to sell the 100% of the free capacity till the end of the year. But let's see if the deals are coming or not.

That's good to hear. Thanks a lot. So now to the more imminent and more prominent topic, the buyback. First question regarding that is my understanding is that you were blocked, including the 17th of this month, from really buying shares. But it wouldn't be my understanding that you would be blocked from taking the decisions already now or earlier than the 17th, be that on sea level or be that in the supervisory board. You just may not do it before that waiting period is over, right?

No, unfortunately not. We have to wait until this waiting period is closed on the 17th of August. So the decision can be made at the end of August.

But can we understand that to be a formal timeline then?

Yeah, that's formal. That's all the formal stuff. So Nora's right. So there could be an Einspruch. I don't know what it is in English. So we have to wait. But as I said, the management decision is already, if we took already the management decision and we aligned with the supervising board, we just have to wait. And there are some formal things we have to cover. And we will cover them and then start, let's say, end of the month.

Good to hear. And second important topic is you imposed yourself regulations also for a tender which are similar to the safe harbour provisions. not being able to pay more than 10% premium. I understood during your presentation now that it's your clear and present intention not only to make a bid for those 2.5 million shares but to really get them. And I also understood that you already checked that legally that you can do both, buy at the market and do a tender. Is that right?

What we like to do as a tender, well, what we like to do as a tender, I'm not sure if we can do both. So what we like to do as a tender, and yes, the assumption is right that we want to get them, the two and a half million shares, we want to get them. This is also right. So let's see where we end up.

Well, I mean, not few people have been buying in at current levels. So if you really want to get the shares, the price would have to be satisfactory even for somebody who has entered on a pricier level than today. So my personal understanding would be it is imperative to be able to make an offer that is acceptable. And 10% from these levels, from like 330, would still be a pretty suppressed level historically. So a route that you could consider is buying just normally on Xetra or Blocks or whatever to have a level that with an upside of 10% from that point is an acceptable level so you really get the shares because otherwise you only bid for them.

That's true.

So you are considering that route.

I will not go into too much detail, but as I said, we are aiming for the 2.5 million. And for us, it's clear that we have to do the necessary steps to get there.

Okay, and the price for the recent takeover wasn't made public as I understood until now, but can you at least give us a rough ballpark figure or even maybe a ballpark figure where you will end up in net cash after the takeover has been paid and after assuming you really get those two and a half shares where we will end will we end it like I mean right now we're standing at like 60 percent of the market cap in cash so do you have any range or broad rough ballpark figure estimate will we then after both is paid standard like 15 or 20 or 10 or 30 or can you say any rough thing about that

So starting with the multiple of the EBITDA multiple, I would say it is a market multiple. When you say you pay for consulting business with own IP, you pay between eight and 12, eight and 12, then it's more the middle of it. For the concerning the EBITDA multiple and the cash position, I would say would be above 30 million.

After the buyback.

More or less, roughly.

Glad to hear that. Thanks a lot for everything.

Thank you, Mr. Price, for your questions. We have one more risen hand by Mr. Kindermann. You may unmute yourself now. I just sent you an invitation.

Yes, hello. Thank you for the presentation. You just mentioned the cost control regarding the choice of models, and I want to ask As you scale internal AI usage and have already automated the 300 processes, I would expect the usage costs to partly offset the savings on the personnel side. Is this the correct assumption and is this figure already included in your expected savings of 7 million?

Yeah, it's included and it's much, much, much less. The main reason is we are using open source models, which we train by ourselves. And we are very much in control of the total cost. When I get your question right. So the $7 million of savings for next year, including the total costs are already included.

OK, so just because it's open source model, you just have the data center cost on your .

Yes.

And then maybe on the timing of the layoffs and the additional one-off costs, are these more in the third or in the fourth quarter?

In both quarters. It depends on the speed you get this and most of them in the third quarter, but the rest in the fourth.

Okay. Thank you. That's it already from my side.

Thank you so much, Mr. Kindermann, for your questions. We have one more question in our chat box by Mr. Scheffels. He's asking, will the current earnings trend affect the planned share buybacks program? I understand that the transformation program needs to be funded, but your liquidity seems still to be sufficient for a share repurchase.

Yeah, it will not have an impact. So we will move on as planned. We are aiming to buy the full 10%. We are allowed to buy back. We will buy. And there will be no impact on the share buyback program by the current measures.

All right. Thank you very much. We have not received any other risen hands or questions in our chat box as far as I can see right now. So I would say with no further questions, we will come to the end of today's earnings call. Thank you very much for your interest in QBeyond AG and a big thank you also to you, Mr. Rixen and Mrs. Wolters for your presentation and the time you took to answer all the questions. Should you have any further questions at a later time, please feel free to contact Investor Relations. I wish you all a successful day. Thank you and bye bye.

Thank you. Bye.